Two narratives for the crunch

In today’s New York Times, David Brooks sets out two “general narratives” on the cause of the financial crisis – the “greed” narrative and the “stupidity” narrative.  According to the greed narrative, we’re in this mess because the financial sector swelled beyond control.  While the stupidity narrative asserts that “overconfident” bankers just didn’t have clue what they were doing.

Why does this matter?  Well, because whichever narrative we subscribe to (or, rather, whichever we subscribe to more; I don’t think they’re mutually exclusive) should determine how we deal with the crisis.  As Brooks puts it:  

“The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington. The stupidity narrative suggests we should preserve the essential market structures, but make them more transparent, straightforward and comprehensible.